KKBox did Spotify in Asia before Spotify even existed

Chris Lin, co-founder and CEO at music streaming service KKBox, was born and raised in Taiwan before he made his move to New York City at age 14. After getting his bachelor’s at Boston University and later attending grad school at Stanford, he landed his first job in Silicon Valley at a management science consulting company. Unhappy with the job, he left and returned to Taiwan after a year. “I felt my opportunity would be better back in Asia,” Lin says.

Back in Taiwan, Lin met Lambert Chien and Mark Hsu and co-founded Skysoft in 2000 (Hsu left after a year). It was Lin’s very first startup and its first product was a desktop browser app called KKman (KK stands for king of kings).

At its peak, KKman had 22 percent of web browser market share in Taiwan, Lin says. In the 2000s, an era when 56K modems ruled the world, browsers and email were two of the most widely used applications on the internet. To generate revenue, KKman connected users to a designated Internet Service Provider (ISP) with a revenue share agreement.

“That was a dream business model. The company had less than 10 people, all engineers, and we just sat there and got free air minutes,” says Lin.

But his dream business model didn’t last once broadband connections took over. Revenue plummeted and the business was in danger. In 2003, Lin ditched the browser business to focus on selling mobile content. He brought Japanese content like ringback tones and Java games, and distributed it in Taiwan. In addition, Lin and his team also did consulting work for carriers to ensure there was enough dough for everyone. In late 2004, fed up with the unscalable model, Lin was determined to change. That change turned out to be a good one. It was KKBox, a music streaming application inspired by Apple’s iTunes.

“We studied to see if the iTunes business model could be implemented in Asia. But we quickly found out that [in Asia it] is impossible. […] There’s too much piracy and people would not pay for music. So we needed to do subscription. Through subscription, people are paying for access [and convenience], not music. It is easier to persuade Asians to pay,” Lin says.

KKBox launched in late 2005 as a PC application. The adoption rate wasn’t high and the startup struggled in its first three to four years. There was a glimmer of hope though, as people were willing to pay for its service because they didn’t want their hard drive to be clogged with Mp3 files.

“But that was just a small group of people. Many people wanted to bring [music] on the go,” he says. Unfortunately, back then, without Google Play and App Store, the mobile app ecosystem didn’t even exist for KKBox to go mobile.

Failure was like death penalty in Taiwan

“We needed to think about profitability from day one. What we could offer was to let users stream five songs per day,” says Lin.

Lin lamented that the startup culture in Taiwan wasn’t very uplifting back then. It didn’t embrace risk. While failure in the US is okay, failure as an entrepreneur in Taiwan is akin to a death penalty in your resume. Lin said that Spotify could amass a great number of users by letting users stream music for free but KKBox couldn’t because it didn’t have big funding. “We needed to think about profitability from day one. What we could offer was to let users stream five songs per day,” he says.

To make users stick, KKBox built a huge editorial team in Taiwan which would churn out entertainment-related content in a new online magazine section within the app. “People listen to these five songs every day, but that wasn’t all there was to do. They were reading our entertainment magazine. So that’s how we get users. We would do exclusive interviews, videos, and photos… there’s a lot of content which we own to attract users,” he says. Users read about new releases of songs and listen it on KKBox. If they hit their five song limit, they will be tempted to pay.

Fast growth thanks to Apple, Android, and telcos

It was only when Apple’s iPhone was first introduced to the world that KKBox managed to achieve strong traction. KKBox’s native app was distributed through the telecom channels when they sold smartphones to their users. “So with iPhone and Android taking off, our service quickly took off in Taiwan,” he says.

In 2009, KKBox expanded to Hong Kong and in 2010 the music streaming startup sold a majority stake to KDDI Japan which helped clear out many of its minority shareholders. “KDDI saw the smartphone era coming and probably envisioned that smartphones would overtake everything,” he says.

In 2011, HTC bought 11 percent of KKBox at a time when the Taiwanese phone-maker was doing really well. With money in the bank, KKBox expanded to Singapore, Malaysia, Thailand, and Japan over the course of the next two years. About two to three months ago, KKBox started its very own concert ticketing platform.

“We are quite confident that within two years, we will be the biggest concert promoter in Taiwan. We have a very dominant position in knowing where the music listeners are and what songs and artists they like. We are thinking of expanding this business outside of Taiwan as well,” Lin explains.

Today, KKBox has become more than just a music streaming company. It offers a mixture of music, entertainment news, and even organizes its own concerts that are broadcast across the countries they are operating in. “We are more like an entertainment hub today,” Lin says.

KKBox ahead of Spotify, says founder

When asked about Spotify, an obvious competitor that has spread across Asia in recent months, Lin believes that the popular service will face many barriers in Asia. “In Europe and US, you just have to deal with three major labels to own 80 percent of the content coverage. But if you are in Asia, you have to deal with the local labels, which is very very different,” he says. Lin also said that differences in Asia such as marketing landscape, payment issues, and user behavior would pose a huge challenge to Spotify.

“I admire Spotify and there’s a great deal of things that we can learn from each other and we are really keeping our eyes close to what they are doing. We are competing in Taiwan, Hong Kong, Malaysia, Singapore, and soon in Thailand I believe. I think in the countries we’re at we are pretty much ahead and dominant,” he says.

Today, KKBox has over 10 million registered users and about two million paying subscribers (including both KKBox and its white label services). In Asia, KKBox streamed over five billion music tracks over the course of 2013, and is en route to hit over 10 billion music streams by the end of this year.

Back in 2010, KKBox had about four to five million users with about 300,000 to 400,000 paying subscribers and was worth about $100 million, Lin revealed. Of course, KKBox’s valuation today is much higher.

Lin wouldn’t rule out getting bought out by another company as a possible exit strategy. But at the moment, he says that KKBox is on its own and is very focused on winning Asian markets. It also plans to go public early next year.

“In the near term, we are not interested in expanding outside of Asia. We want to stay very Asian-focused and we want to be a 360-degree music business,” says Lin.